March 01, 2007

Fossil Fools - 2

Here's the first half of a draft of the review of the 2005 book "Oil Crisis", by Dr Colin Campbell, focusing on the largely technical analysis rather than his politics. This should be self-explanatory. I'm particurly interested in hearing feedback on this. Apologies for the screwed up formatting, but I've had to paste this out of MS Word, and I'm not having any luck in preserving a legible layout when doing this.

Colin Campbell is creating more heat than
light in the debate over the future of energy

Oil prices are now at an all-time record of
over seventy dollars a barrel, up from barely ten dollars back at the beginning
of 1999. For the most part, traders and
the media ascribe the blame to rocketing demand from China’s
hungry economy, more recently exacerbated by ongoing political tensions over
the Iranian nuclear program

Dr Colin Campbell, a British geologist, now
retired to a village in County Cork after decades in the oil business, has another explanation. He says that we are near the turning point for
the Age of Oil, when geological limits begin to bite as we run through the last
of the available oil that allows us to power our society from prehistoric
sunshine. No matter how hard we look or
what magical new technology we bring to bear, we simply cannot increase oil
production much above current limits: "Understanding depletion is simple.
Think of an Irish pub. The glass starts full and ends empty. There are only so
many more drinks to closing time. It’s the same with oil. We have to find the
bar before we can drink what is in it."

Campbell writes that exploration by the world’s oil companies have failed to
turn up much new oil for decades, with most of the major fields discovered by
the mid-sixties. As wells in America, the North Sea and elsewhere start
to run out, he predicts that the world will wake with a bump to the fact that
expanding demand will meet constrained supply.

His work is based on models begun by a
Shell geologist, M King Hubbert, who forecast in 1958 that oil production in
the continental US would rise gradually until reaching a maximum level or “peak”
1970, then gradually falling, with production tracing a bell-shaped curve over
time, as in the diagram. Hubbert’s peak”
occurred as predicted in 1970. Now Campbell is the
leading voice among those who have applied the model to global oil production, the
“peak oil” movement, forecasting that a similar fall-off in world oil
production will bite within five years.

The Association for the Study of Peak Oil and Gas (ASPO), found online at www.peakoil.net and the Irish branch at www.peakoil.ie), brings together activists who research and campaign on the issue. The bibliography of Campbell’s book, “Oil Crisis”, published in November last year, lists over a hundred articles he has written and at least three books. As oil prices have climbed, media interest has snowballed, with Campbell making regular appearances on television and in the pages of the world press. On 31 May, he is scheduled to be the lead speaker at a conference on peak oil in Cork organised by ASPO Ireland, chaired by RTE’s Philip Boucher Hayes.

The Green Party have been vocal enthusiasts
for the peak oil idea, with Eoin Ryan TD, speaking in the Dail in early May, praising
Campbell and describing peak oil as “an issue that is close to my party's
heart…we need to change every decision in Government on the basis that we are
facing a geological reality of dwindling…resources”. Speaking of the other parties, Trevor Sargent
told Magill recently, “They just don’t realise that our energy dependency is as
precarious as it is. It’s clearly linked to depletion; we’re simply using up
more than we’re finding. So we’re not just dealing with foolishness here, its
criminal neglect”.

Now the Irish government has been the first
to give the theory its imprimatur, with a report published in April by the
state industry advisory authority Forfás, which called for a national strategy
to deal with oil peaking within ten to fifteen years.

George Clooney's Oscar-wining film about
the global oil business, Syriana, has brought the theme of peak oil to a global
audience, according to an interview director and screenwriter Stephen Gahan
gave to the Irish Times in February. The
film’s story echoed the Iraq war, Middle East terrorism and competition between America and China for
oil and gas holdings. As Matt Damon’s character,
an American oilman tells an Arab prince, showcasing an intensifying
international contest over oil resources. “It's running out... and ninety percent of what's left is in the Middle East. (However, the real
figure is 65%, according to energy economist Peter Odell in his 2005 book).

This is a fight to
the death.” Major oil price rises after
the first OPEC oil shock, the Iranian revolution and the 1990 invasion of Kuwait all coinciding with deep economic downturns, which might be expected to recur should
the supply of oil fall short. Others,
Campbell included, go further, offering a vision of catastrophic collapse of
societies and governments, a Mad Max society where only those in remote rural
areas may survive.

Pouring
Oil on Troubled Waters

Extraordinary claims, as the astronomer and
debunker of pseudoscience Carl Sagan wrote, require extraordinary evidence. On a
closer examination than most journalists have made, Campbell'sclaims, presented
in “Oil Crisis”, do not stand up. The
book is, quite simply, a mess, as if a poorly-constructed website had been put
to paper without proof-reading or editing. It meanders through reams of irrelevant material, sentences left
incomplete and references to source are often missing.

In presenting Campbell’s analysis
of economics, politics and history sees him moving from geology as googleology. “The official account of events lacks
credibility in many important regards forcing the reader to consider what are
dismissively terms conspiracy theories, which cannot be ignored”, he writes in
the preface. Conspiracy theory alone
seems to be offered as the explanation fro why support for Campbell's position from other
authorities is slender, in the energy industry itself, among academics and the
international organisations of which Ireland is a member.

He begins on page 2 in his introduction to peak oil: “The subject is clouded in mystery. As you begin to dig into it, you find a maze of conflicting information and disinformation, there are colossal vested interests with motives to distort and confuse…Even I, as an old man in an Irish village, have received the attentions of the US Intelligence Service [sic]”.

The foundation of Campbell’s work and
perhaps the founding text of the whole peak oil movement is a study he
undertook for, Petroconsultants, an oil industry consulting firm in 1995,
together with the French geologist Jean Laherrère, who remains his partner in spreading
the peak oil message.describes
it as “the most comprehensive analysis of the world’s endowment” (p.147, note
16). For this report, they had access
to confidential non-public data shared by the oil companies with Petroconsultants. Since that time, any connection between the
pair and Petroconsultants, which was taken over by another consultantcy, IHS,
several years later, has been severed. Now,
he writes, he guesses an amount by which he reduces the estimates of global oil
reserves published in two respected industry sources, “The Oil & Gas
Journal” and BP’s annual “Statistical Review of World Energy” (p.136, pp.147-148).

Meanwhile, IHS, which still maintains a database of the oil companies’ internal estimates, has dismissed the peak oil forecasts. “There's a lot more oil out there still to find”, Peter Jackson, director of IHS CERA, another geologist with decades of international experience, said, presenting the results of a 2005 study. "We see no evidence to suggest a peak before 2020, nor do we see a transparent and technically sound analysis from another source that justifies belief in an imminent peak. A detailed new audit of our own analysis and the enormous scale of reserve upgrades in existing fields, confirmed by the most extensive and complete databases on field production – the proprietary databases of IHS, of which [we are] now part – contradicts those who believe that peak oil is imminent."

One key difference between the two sets of estimates arises because of the crucial impact of a seemingly minor statistical technicality. When plotting the amount of oil discovered across time; Campbell assigns any upward revisions to estimates of the size of existing fields back in the year in which the field itself was discovered. From this, he concludes that we are unable to replace our current production by successful exploration for new fields. IHS analysts disagrees; "For the period from 1995 through 2003, according to IHS figures and CERA analysis, global production of 236 billion barrels was more than compensated for by exploration success of adding 144 billion barrels and field upgrades of 175 billion barrels."

Shell executive David Frowd, presented a summary of Shell’s internal data to a conference in Thurles in 2003, saying that oil production would not peak for at least another two to three decades, with no peak likely to become visible by that time either. He also emphasised the distinction between the two methods of treating reserves, arguing that as the technology for increasing the amount of oil, typically still only 35%, extracted from each field, oil supply would more than keep pace with demand growth.

“Oil Crisis” also manages to contradict the works it claims to be based on.

Campbell refers in his bibliography to a 2001 statistical study of oil production in the US by Professor Robert Kaufmann, a geographer at BostonUniversity, but neglects to mention that Kaufman dismisses Hubbert’s theory. Kaufmann told me, “I don't believe that Hubbert's method can be used to estimate world oil supplies or the timing of the peak….In summary, the conditions that allowed Hubbert to make his accurate forecast for the US reserves excluding Alaska do not apply to the world as a whole."

Similarly, Campbell also claims the support of the then head of Oxford University’s Institute of Energy Studies, Robert Mabro, who reviewed the 1995 Petroconsultants study, again leaving out the inconvenient fact that Mabro noted that the study was already pessimistic compared with others that had been published by then and concluded that “Is this because a large proportion of the exploration effort is expended in places where there is little oil, the petroleum rich region being closed for one reason or another to foreign oil companies? To a large extent the answer must be yes, which suggests that the problems are not entirely geological.” Professor Mabro, now retired, could not be reached for comment by the time of writing.

A further disagreement between Campbell and Laherrère’s work and that of other experts comes in their definitions of what exactly oil is. Crude oil is blend of different chemical compounds and can be extracted in a plethora of forms from many different environments. However, they restrict their analysis to the liquid oil that can be extracted for a production cost of less than $20 to $25 per barrel, about a third of the level of current world prices (pp123-135 and p.169) Campbell ignores these sources, even though he quotes them as already supplying 16 million barrels a day, about 20% of present production (p.125).

http://www.iea.org/w/bookshop/add.aspx?id=204

The International Energy Agency brings together twenty six industrialised energy importing countries, including the Ireland, most of the EU, America and Japan. In its report “Reserves to Resources”, published last year, it estimates another 5.5 trillion barrels, about three times Campbell's estimate of the available oil according to his restricted definition, are available at economical production costs lower than current world prices of nearing $75.

The conspiracy theories are perhaps superficially plausible when looking at OPEC. In key oil producers - including Kuwait, Iran, Iraq and Saudi Arabia – getting accurate and independent information about oil reserves and production has usually proven difficult in largely closed societies without an open political process or free press, and where state monopolies control the oil and gas industry, siphoning off the profits to unelected ruling elites.

There were massive jumps in reported reserves in 1986 Iran and Iraq (112%) while the two were at war and desperate for revenue. These reserves provide the basis by which OPEC’s system of quotas for sharing the world oil market out among its members operates, allocating a quota of production to each so that the total production is not enough to force down prices. Cheating on quotas has been endemic. Instead, Saudi Arabia has acted as the cartel’s enforcer, using its dominant position as the largest producer to enforce co-operation, threatening to open the taps and engineer a glut, and punishing every producer with shrunken revenues. Furthermore, in the past few years, unlike most of the eighties and nineties, the quotas have been economically irrelevant, making the window-dressing Campbell accuses them of pointless nowadays. Now, rather than quotas, the key constraint has each country has been able to sell almost anything it can produce into a market where there is almost no spare supply and constantly rising prices. Even now, however, reserve additions continue.

The IEA points to Canada’s oil sands, which are more difficult and costly to refine than conventional liquid crude, alone contain more oil than all the world’s current reserves. Already in 2002, 178 billion barrels of reserves from oil sands were added, placing Canada second only to Saudi Arabia in the magnitude of reserves (Odell, p. 51)
Venezuela is now asking OPEC to recognise it as having the world's largest reserves. In early 2006,Venezuela announced that it would be asking the rest of OPEC to recognise it as the country with the world’s largest oil reserves, bypassing Saudi Arabia, with enough oil to maintain its current production for another two centuries. This comes as the country’s huge stocks of ultra-heavy crude oil - which is more expensive and difficult to refine, but which is economically viable at prices above $30-$40 per barrel - is being commercially produced for the first time.
As an economic analysis, “Oil Crisis” is incomplete, offering a view of supply, but just assuming ever increasing demand and from that, a situation of stratospheric prices, like those cartoon characters which
go over the edge of a cliff and continue walking on thin air.

Neither does Campbell ever acknowledge the economic effect of high prices in curbing consumption. Regardless of exhortations from Greens, nothing is as likely to encourage energy conservation and improved efficiency as much as increased costs for motoring or electricity, as the craze for Toyota’s Prius hybrid petrol-electric cars, Europe’s rapid renaissance for nuclear power or the rapid sprouting of windmills.
Albert Bressand, another former Shell analyst and now a special advisor to EU Energy Commissioner Andris Piebalgs is similarly dismissive. The Commission’s study on energy supply and security, produced by the Dutch government’s Clingendael research institute, ignores the peak oil thesis, citing instead the BP “Statistical Review” and “Oil &Gas Journal” statistics, along with those from Peter Odell, an emeritus professor at Erasmus University in Rotterdam, who offers the most optimistic view of any expert. http://www.clingendael.nl/publications/2004/200401000_ciep_study.pdf

Paul Domjan, now a consultant for FIRS, also worked at Shell before joining the Pentagon’s European Command, which is responsible for US military forces in 91 countries in Europe, Russia, Turkey and Africa. He says that “the peak oil debate misses the point; the places there might be oil may be inaccesible owing to political problems, such as Russia, Saudi Arabia and West Africa.”

The work of the UN’s Intergovernmental Panel on Climate Change provides the foundation for policies against global warming such as the Kyoto Protocol. Its massive modelling effort, reflecting a comprehensive global survey of scientists shows, even under pessimistic views, massive growth in global wealth and energy use over the next century. Laherrère condemns the Panel’s forecasts for oil and gas reserves, a stance more usually associated with the Bush White House or those oil companies who lobby against the Kyoto Protocol on climate change.

Peak oil activists also show little understanding of the historical record. IHS director, Daniel Yergin, who won the Pulitzer prize for his history of oil, “The Prize”, doesn’t hide his disdain, saying recently that “This is the fifth time we’ve run out of oil since 1880”.

Vaclav Smil, a professor at the University
of Manitoba in Canada, points out in his 2005 book “Energy at the Crossroads”, that
peak oil forecasters have a history of being proved wrong, beginning with
Hubbert himself, who forecast a global peak between 1993 and 2000. In 1979, the CIA opined that global oil “output must fall within a decade ahead”. Oil company BP forecast the same year a world peak in production in 1985, with the available oil production falling by a quarter by 2000; in
reality global oil production rose 25% over that time. In 1990, the UN concluded that production
outside the OPEC countries had already peaked, but it grew 5% over the next
decade.

Smil also points to the historical transitions between dominant energy sources – from wood to coal, coal to oil, from oil to gas and on to electricity, each of which has brought reduced cost, increased energy availability and a cleaner environment, as wind and other economic renewable sources. <hr>Part two will follow soon.